Saturday, February 25, 2012

Exactly one year ago today the title of this column was dueling inflection points edition, as both initial jobless claims and gasoline prices were at 52 week extremes, but in opposite directions. Here we are again, almost exactly in the same spot.

Employment related indicators were all positive:

The Department of Labor reported that Initial jobless claims rose by 3,000 to 351,000. The four week average declined by 6250 to 359,000. This too is the lowest reading since spring 2008.

The American Staffing Association Index rose by 1 to 87 last week. It is now right in between its levels of 2011 and 2007, higher than the former and below the latter.

The Daily Treasury Statement showed that for the first 15 reporting days of February, $120.7 B was collected vs. $115.6 one year ago, a gain of 4.4%. For the last 20 reporting days, $151.1 B was collected vs. $146.6 B a year ago, an increase of 3.3%.

On the other hand, Gasoline prices are markedly higher than one year ago while usage continues to be much lower:

Oil rose about $4.00 this week through Thursday to close over $108 a barrel. Gas at the pump rose another $.07 to $3.59. Both of these are significantly above the point where they can be expected to exert a constricting influence on the economy. Gasoline usage, at 8627 M gallons vs. 9101 M a year ago, was off -5.2%. The 4 week moving average is off -6.1%. The YoY comparisons went negative last March, and have continued substantially so since July.

Housing reports were mixed:

The Mortgage Bankers' Association reported that The Refinance Index decreased -4.8% from the previous week, but is still closetto its highest level in over half a year. The seasonally adjusted Purchase Index decreased another -2.9% from the prior week, and was -9.2% lower YoY. The purchase index is at the bottom of its 21 month overall flat range. Any further significant deterioration would have to be viewed as a violation of that trend to the downside.

YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were positive, up +4.1%. This number has stabilized on a YoY basis in the last few weeks, which is what I would have expected. I expect this series to continue positive, but it will be interesting to see if it drifts lower as we hit the peak selling season.

Sales remained positive, while transportation turned negative:

The ICSC reported that same store sales for the week ending February 11 were off -2.2% w/w, but increased 3.2% YoY. Shoppertrak reported +6.3% YoY gains. Johnson Redbook reported a 2.9% YoY gain.

The American Association of Railroads reported a decline in weekly rail traffic for the week ending February 18, 2012, with U.S. railroads originating 281,989 carloads, down 5.2 percent compared with the same week last year. Intermodal volume for the week totaled 221,003 trailers and containers, down 5.6 percent compared with the same week last year. I am pleased to report that Railfax is back with some free graphs. While the YoY comparisons have been decidedly erratic this winter, that may be because of the batch of winter storms that hit in 2011 in the comparison period. The Railfax graphs show that rail traffic continues to trend higher on a YoY basis.

Money supply was mixed and Credit spreads were flat:

M1 was up +0.3%t last week, and also up +0.3% month over month. On a YoY basis it increased to +23.1%, so Real M1 is up 20.2%. YoY. M2 also rose +0.3% week over week, but was down -0.4% month over month. It was up 10.1% YoY, so Real M2 was up 7.2%. In short, real money supply indicators continue strongly positive on a YoY basis.

Weekly BAA commercial bond rates decreased .02% to 5.15%. Yields on 10 year treasury bonds also fell .02% to 1.97%. The credit spread between the two, which had a 52 week maximum difference in October but remained tightened this past week.

Last year I concluded my column by saying that I expected Oil to win its duel with initial jobless claims. It did as initial claims flattened and then rose in the summer. I expect the same result this year. While as I said yesterday I expect U-3 unemployment to decline to under 8% by May, that is a lagging indicator. Consumers are better able to handle $4 a gallon gasoline than they were in 2008, but depleted most of their savings since then last year. If an Oil shock is going to bring on more than a stall this spring and summer, watch the weekly same store retail sales comparisons. They held up well all last year. If their YoY readings start going under +2%, that will be a danger sign. If consumers also retrench further than they already have in terms of gasoline usage, i.e., a one week YoY usage decline of more than 10%, or a 4 week YoY decline of more than 7.5%, that would be another strong danger signal.

Friday, February 24, 2012

Let's take a look at the unemployment rate by age bracket, starting with the youngest and moving to the oldest.

The unemployment rate for 16-19 YOs spiked to over 25% after the last recession, but has been dropping. However, I certainly wouldn't call this fatal, as this age group is probably now staying in school as opposed to working.

The 20-24 YO unemployment rate spiked to nearly 17.5%, but is also heading lower. This number is a bit more troubling than the 16-19 YP chart, but, again, this is an age group that would be in college/education at this age. However, the high number could also mean the job opportunities for recent graduates aren't that high, which is concerning.

Now we're moving into troubling areas, as the 25-24 age group should be fully engaged in the labor force. Instead, they are unemployed at a high rate -- the highest since the recession of the early 1980s.

The unemployment rate for the 35-44 age group spiked to about 9%, but has since moved lower to around 7%. However, again, this number is far too high.

This age group should be fully engaged as well, and they should be getting paid higher salaries as they are starting to hit their peak earnings potential. While 6.5% is not a bad unemployment rate, notice how this age group has historically been less prone to higher rates of unemployment.

The unemployment rate for the 55+ is also far too high.

I charted the larger age groups on the above chart for the last 10 years. Notice first that the 25-34 age group has experienced a higher rate of unemployment than other groups. Part of this is educationally related -- these are the age groups when most post college education occurs. Next, notice that he 35-44 experiences the next highest rate of unemployment on average, even during the last expansion. This is followed by the the 35054 age groups and finally the 55+ age group.